<p>Hi,
We have Junior who will be applying in Fall 2011 to colleges. He will graduate High School in 2012 and start college in 2012. So when do we apply for Financial aid?
I understand I need to report income, assets etc. Question I have is which year's income - 2010 ( filed by 2011 April 15) or 2011 ( filed by 2012 April) - is taken into considerration. Also is it AGI per IRS or is there a special definition for FAFSA ?
About Assets -
What type of assets are considered - Liquid. We have long term CD's. Will they count towards family contribution?
Is Home Equity in Primary residence considered available towards family contribution?
What about long term stock investments that are considerably in loss?<br>
Is IRA (tradition or Roth, Health Savings) taken into consideration?<br>
What amount of emergency cash does FAFSA consider as safety for family (6 months expenses - to cope with disruptions in Income)?
What about an asset like undeveloped house sites - not yielding any income currently?</p>
<p>I would greatly appreciate if someone could help me out here.</p>
<p>You cannot file the 2012-2013 FAFSA before january 1st 2012. You would need to check with your schools for their priority deadlines for filing. For the 2012-2013 school year it is the 2011 income that will be reported. Aim to get your 2011 taxes done early, this is not the year to file late.</p>
<p>Some schools also require their own FA forms or CSSprofile. They ask for more details than FAFSA including primary home value. How the info is used will vary by school. Schools that require CSS generally use CSS for their own institutional aid and FAFSA for determining any federal aid.</p>
<p>The AGI is the AGI from the tax return. Some things are added back to the AGI in the EFC formula though. For instance 2011 contributions to retirements accounts (such as IRAs, 401ks) will be added back to the AGI as they are considered available income.</p>
<p>Certain assets are not reportable in FAFSA. The main ones are the primary home and retirement accounts (they must be actual retirement accounts such as IRAs, not just money “earmarked” for retirement). </p>
<p>FAFSA does not care if the assets are liquid or not. Long term CDs, stock values, real estate other than the primary home, land, cash in bank, savings - they are all assets as far as FAFSA is concerned. An asset that is not producing income is still reported as an asset. An asset that is producing income will be reported as an asset and the income will be included as income. </p>
<p>There is a certain amount of asset protection based on the number of parents and the age of the older parent. For the 2011-2012 FAFSA a 2 parent family where the older parent is 50 has asset protection of a little over $50,000. A single parent family where the parent is 50 has asset protection of around $20,000.</p>
<p>Also…keep in mind that FAFSA just generates a number for colleges to use to determine whether you qualify for fed grants (for lowish incomes) and student loans and work-study.</p>
<p>FAFSA doesn’t give you any aid. It will generate an EFC number.</p>
<p>The term EFC (expected family contribution) is the biggest misnomer in the college process.</p>
<p>It WRONGLY suggests that your EFC is how much you have to pay. NO…that’s not right. Colleges do NOT charge a sliding scale based on your EFC. </p>
<p>Most schools do NOT have much institutional funds to give. Most schools rely heavily on federal aid which isn’t much at all.</p>
<p>For instance…you could have an EFC of $15k. At a school that charges $50k, they could expect you to pay all costs with loans, work-study, and family funds. Rr they may throw in a $10k grant and you’ll have to cover the other $40k</p>
<p>So, you’ll be left scratching your head wondering what that EFC meant. </p>
<p>The schools that give the best aid usually require CSS Profile which takes everything into account…home equity, etc. Some of these schools even have their own forms. And CSS schools each generate their OWN “family contribution” expectation which can vary by many thousands.</p>
<p>Any investments that aren’t protected in real retirement accts will get included on FAFSA. It doesn’t matter if you consider CDs are for retirement. Those aren’t real retirement accts.</p>
<p>You will have some protected amounts…about $40k (not 6 months of salary). </p>
<p>an undeveloped house site is an asset. It could be sold to pay for college. It’s not protected because it’s a luxury to have such a thing.</p>